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How to Protect Yourself When Leaving a Car Deposit

Last Updated: Apr 13, 2023

There are certain situations when a dealer will ask for a deposit to make sure you're serious about purchasing a vehicle. This is especially true in today's market where inventory shortages can result in high demand for specific vehicles that are not on dealer lots yet.  

Sometimes dealers will try to get a deposit solely to keep you at the dealership or to wear you down until you agree to purchase.

When is a Deposit Required?

There are only 3 times you should ever have to give a deposit on a vehicle.

  1. If the dealer doesn't have the car in stock but is willing to swap vehicles with another dealer (called a dealer trade)
  2. If the dealer special orders a car for you from the factory
  3. If the dealer holds a vehicle for a certain amount of time AFTER you've negotiated the price.

Although I don't recommend doing a dealer trade, if you do make certain the dealer has located the exact vehicle they will be trading. Have them write down the VIN # and the exact specifications of the vehicle.

Sometimes dealers will lie just to string you along until they (hopefully) locate a vehicle for you. This usually happens with cars that are in high demand and low supply, so don't ever leave a deposit unless they can show you the exact vehicle and the date it will arrive.

If you're ordering a car directly from the factory, you will be required to leave a deposit. There's usually no shenanigans involved here - but make sure you read the fine print carefully. The deposit may not be refundable if you change your mind.

Lastly, a dealer may ask for a deposit to hold a vehicle for you after a Purchase & Sale Agreement has been signed. They want to make sure you're serious about buying the car before they will agree to hold it for you. This only happens if you need time to gather payment for the vehicle or take out a loan. Usually, this is legitimate, but make sure you're leaving a fully refundable deposit and not a partial payment.

Are Deposits Refundable?

While most deposits on new cars are non-refundable, there are some exemptions and laws that offer ways to get the deposit back.

First, if the dealer cancels the sale or is not able to sell you the vehicle at the agreed upon price and terms, you should automatically get the deposit back.

If you decide to cancel the purchase after putting a deposit down, you may still be entitled to a refund depending on your State's laws. For example, California has a law that gives you a cooling off period of up to 10 days to get a deposit back.

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About The Author

Gregg Fidan Gregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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